ALANCO TECHNOLOGIES, INC.


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB


        X  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      ----
                              EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 2006

        X  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
      ----
         For the transition period from            to
                                        ----------    ----------

                          Commission file number 0-9347
                                                 ------
                            ALANCO TECHNOLOGIES, INC.
                            -------------------------
        (Exact name of small business issuer as specified in its charter)

                                     Arizona
                                     -------
         (State or other jurisdiction of incorporation or organization)

                                   86-0220694
                                   ----------
                       (I.R.S. Employer Identification No.)

          15575 N. 83rd Way, Suite 3, Scottsdale, Arizona   85260
          -----------------------------------------------   -----
            (Address of principal executive offices)      (Zip Code)

                                 (480) 607-1010
                                 --------------
                           (Issuer's telephone number)

                 ----------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

    As of May 5, 2006 there were 31,265,200 shares, net of treasury shares,
    -----------------------------------------------------------------------
                          of common stock outstanding.
                          ----------------------------

 Transitional Small Business Disclosure Format (Check one): Yes     No X
                                                               ----   ----

Forward-Looking Statements: Some of the statements in this Form 10-QSB Quarterly
Report, as well as statements by the Company in periodic press releases, oral
statements made by the Company's officials to analysts and shareholders in the
course of presentations about the Company, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Words or phrases denoting the anticipated results of future events such
as "anticipate," "believe," "estimate," "will likely," "are expected to," "will
continue," "project," "trends" and similar expressions that denote uncertainty
are intended to identify such forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such factors include,
among other things, (i) general economic and business conditions; (ii) changes
in industries in which the Company does business; (iii) the loss of market share
and increased competition in certain markets; (iv) governmental regulation
including environmental laws; and (v) other factors over which the company has
little or no control.

                                       1
<PAGE>


<TABLE>
<CAPTION>


                                      INDEX

Page Number
<S>      <C>      <C> <C>                                                   <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets March 31, 2006
                      (Unaudited) and June 30, 2005.........................3

                  Condensed Consolidated Statements of Operations
                      (Unaudited)for the three months ended
                      March 31, 2006 and 2005 ..............................4

                  Condensed Consolidated Statements of Operations
                      (Unaudited)for the nine months ended
                      March 31, 2006 and 2005...............................5

                  Condensed Consolidated Statements of Changes in
                      Shareholders' Equity (Unaudited) For the nine
                      months ended March 31, 2006 ..........................6

                  Condensed Consolidated Statements of Cash Flows
                      (Unaudited)for the nine months ended
                      March 31, 2006 and 2005...............................7

         Notes to Condensed Consolidated Financial Statements
                  (Unaudited)...............................................9
                  Note A - Basis of Presentation and Recent Accounting
                           Pronouncements
                  Note B - Inventories
                  Note C - Contracts in Process
                  Note D - Deferred Revenue
                  Note E - Loss per Share
                  Note F - Equity
                  Note G - Industry Segment Data
                  Note H - Related Party Transactions
                  Note I - Line of Credit
                  Note J - Litigation
                  Note K - Subsequent Events
                  Note L - Nasdaq Notification

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations......................15

         Item 3.  Controls and Procedures..................................20

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings........................................20

         Item 2.  Unregistered Sale of Equity Securities and
                  Use of Proceeds..........................................20

         Item 4.  Submission of Matters to a Vote of Security Holders......21

         Item 6.  Exhibits ................................................21

</TABLE>

                                       2
<PAGE>


<TABLE>
<CAPTION>
                            ALANCO TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      AS OF MARCH 31, 2006 AND JUNE 30, 2005

                                                  March 31, 2006 June 30, 2005
                                                  --------------  ------------
<S>                                               <C>            <C>
ASSETS                                              (unaudited)
CURRENT ASSETS
   Cash and cash equivalents                        $    197,300  $    737,300
   Accounts receivable, net                              925,400     1,091,400
   Notes receivable, current                              29,600        80,000
   Inventories, net                                    2,252,900     1,902,600
   Prepaid expenses and other current assets             545,100       378,200
                                                    ------------  ------------
      Total current assets                             3,950,300     4,189,500
                                                    ------------  ------------

PROPERTY, PLANT AND EQUIPMENT, NET                       195,700       273,500
                                                    ------------  ------------

OTHER ASSETS
   Goodwill                                            5,356,300     5,356,300
   Other intangible assets                               394,600       560,700
   Long-term notes receivable, net                         3,500         8,000
   Net assets held for sale                               46,600       100,200
   Other assets                                           47,500        55,700
                                                    ------------  ------------
      Total other assets                               5,848,500     6,080,900
                                                    ------------  ------------
TOTAL ASSETS                                        $  9,994,500  $ 10,543,900
                                                    ============  ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Notes payable, current portion                         89,000             -
   Accounts payable and accrued expenses            $  1,494,100  $  1,279,600
   Billings in excess of cost and est
      earnings on uncompleted contracts                   31,900         4,200
   Deferred revenue, current                              47,400        60,100
                                                    ------------  ------------
      Total Current Liabilities                        1,662,400     1,343,900

LONG-TERM LIABILITIES
   Notes payable, long-term                            1,314,100     1,143,600
                                                    ------------  ------------
TOTAL LIABILITIES                                      2,976,500     2,487,500
                                                    ------------  ------------

   Preferred Stock - Series B, 71,400 and 68,000
      shares issued and outstanding, respectively        719,300       667,300
                                                    ------------  ------------

SHAREHOLDERS' EQUITY
   Preferred Stock - Series A Convertible, 3,122,900
      and 2,781,200 shares issued and outstanding,
      respectively                                     3,925,200     3,412,700
   Common Stock- 30,395,200 and 26,680,200 shares
      outstanding, net of 500,000 shares of
      Treasury Stock                                  73,774,500    71,714,600
   Treasury Stock, at cost                              (375,100)     (375,100)
   Accumulated deficit                               (71,025,900)  (67,363,100)
                                                    ------------  ------------
      Total shareholders' equity                       6,298,700     7,389,100
                                                    ------------  ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY            $  9,994,500  $ 10,543,900
                                                    ============  ============
</TABLE>

       See accompanying notes to the consolidated financial statements

                                       3
<PAGE>
<TABLE>
<CAPTION>

                            ALANCO TECHNOLOGIES, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
<S>                                                 <C>           <C>

                                                        2006          2005
                                                    ------------  ------------

NET SALES                                           $  1,466,200  $  1,531,200

   Cost of goods sold                                    914,700       975,300
                                                    ------------  ------------

GROSS PROFIT                                             551,500       555,900

   Selling, general and administrative expense         1,580,100     1,712,200
                                                    ------------  ------------

OPERATING LOSS                                        (1,028,600)   (1,156,300)

OTHER INCOME & EXPENSES
   Interest expense, net                                 (23,700)      (11,200)
   Other income, net                                      60,200        63,900
                                                    ------------  ------------
LOSS FROM OPERATIONS                                    (992,100)   (1,103,600)

   Preferred stock dividends - paid in kind             (281,500)     (252,000)
                                                    ------------  ------------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS        $ (1,273,600) $  1,355,600)
                                                    ============  ============

NET LOSS PER SHARE - BASIC AND DILUTED
   - Net loss attributable to common shareholders   $      (0.04) $      (0.05)
                                                    ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING            30,111,900    25,514,500
                                                    ============  ============
</TABLE>

        See accompanying notes to the consolidated financial statements

                                       4
<PAGE>
<TABLE>
<CAPTION>

                            ALANCO TECHNOLOGIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE NINE MONTHS ENDED MARCH 31, (Unaudited)
<S>                                                 <C>           <C>
                                                        2006          2005
                                                    ------------  ------------

NET SALES                                           $  4,692,700  $  5,353,900

   Cost of goods sold                                  3,085,100     3,493,500
                                                    ------------  ------------

GROSS PROFIT                                           1,607,600     1,860,400

   Selling, general and administrative expense         4,716,800     4,779,800
                                                    ------------  ------------

OPERATING LOSS                                        (3,109,200)   (2,919,400)

OTHER INCOME & EXPENSES
   Interest expense, net                                 (65,900)      (38,800)
   Other income,  net                                     76,900        74,700
                                                    ------------  ------------
LOSS FROM OPERATIONS                                  (3,098,200)   (2,883,500)

   Preferred stock dividends - paid in kind             (564,600)     (503,700)
                                                    ------------  ------------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS        $ (3,662,800) $ (3,387,200)
                                                    ============  ============

NET LOSS PER SHARE - BASIC AND DILUTED
   - Net loss attributable to common shareholders          (0.13)  $     (0.13)
                                                    ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING            28,351,700    25,118,000
                                                    ============  ============
</TABLE>

       See accompanying notes to the consolidated financial statements

                                       5
<PAGE>
<TABLE>
<CAPTION>

                                                    ALANCO TECHNOLOGIES, INC.
                             CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                    FOR THE NINE MONTHS ENDED MARCH 31, 2006 (unaudited)

                                                           SERIES A
                                  COMMON STOCK          PREFERRED STOCK       TREASURY STOCK          ACCUMULATED
                               SHARES      AMOUNT      SHARES     AMOUNT      SHARES   AMOUNT      DEFICIT      TOTAL
                            -----------------------  ---------------------- ------------------  ------------  -----------
<S>                        <C>         <C>          <C>         <C>          <C>     <C>        <C>           <C>

Balances, June 30, 2005     27,180,200 $ 71,714,600  2,781,200  $ 3,412,700  500,000 $(375,100) $(67,363,100) $ 7,389,100

  Exercise of options          140,000       53,600          -            -        -         -             -       53,600
  Exercise of warrants       1,850,000    1,135,000          -            -        -         -             -    1,135,000
  Shares issued for
     prepaid services          225,000      135,100          -            -        -         -             -      135,100
  Quarterly stock valuation          -      (64,700)         -            -        -         -             -      (64,700)
  Private Offering, net      1,500,000      830,000          -            -        -         -             -      830,000
  Preferred dividends,
     paid in kind                    -            -    341,700      512,500        -         -             -      512,500
  Nasdaq Fees                        -      (29,100)         -            -        -         -             -      (29,100)
  Net loss                           -            -          -            -        -         -    (3,662,800)  (3,662,800)
                            ---------- ------------  ---------  -----------  ------- ---------  ------------  -----------

Balances, March 31, 2006    30,895,200 $ 73,774,500  3,122,900  $ 3,925,200  500,000 $(375,100) $(71,025,900) $ 6,298,700
                            ========== ============  =========  ===========  ======= =========  ============  ===========
</TABLE>


                                       6
<PAGE>
<TABLE>
<CAPTION>

                         ALANCO TECHNOLOGIES, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED MARCH 31, (Unaudited)
<S>                                                <C>            <C>

                                                        2006          2005
                                                    ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Loss from operations                             $ (3,098,200) $ (2,883,500)
   Adjustments to reconcile net loss to net
   cash used in operating activities:
      Depreciation and amortization                      301,200       257,300
      Stock issued for services                           51,100        73,300
      Income from assets held for sale                   (23,600)      (74,800)
   Changes in:
      Accounts receivable, net                           166,000      (396,300)
      Inventories, net                                  (328,600)       24,700
      Prepaid expenses and other current assets         (147,600)      (64,200)
      Other assets                                         8,200         5,300
      Accounts payable and accrued expenses              214,500       316,700
      Deferred revenue                                   (12,700)       78,000
      Billings and estimated earnings in excess
        of costs on uncompleted contracts                 27,700       (25,800)
                                                    ------------  ------------
      Net cash used in operating activities           (2,842,000)   (2,689,300)
                                                    ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net cash from assets held for sale                     77,200       123,400
   Collection of notes receivable, net                    54,900        12,000
   Purchase of property, plant and equipment             (80,000)     (101,700)
   Patent renewal and other                                  900        (1,800)
                                                    ------------  ------------
   Net cash provided by investing activities              53,000        31,900
                                                    ------------  ------------
</TABLE>

      See accompanying notes to the consolidated financial statements

                                       7
<PAGE>
<TABLE>
<CAPTION>

                       ALANCO TECHNOLOGIES, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
               FOR THE NINE MONTHS ENDED MARCH 31, (Continued)
<S>                                                <C>            <C>
                                                        2006         2005
                                                    ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Advances on borrowings                           $    495,500  $         -
   Repayment on borrowings                              (236,000)       (5,200)
   Net proceeds from sale of equity transactions       1,989,500     1,300,000
                                                    ------------  ------------
   Net cash provided by financing activities           2,249,000     1,294,800
                                                    ------------  ------------

NET (DECREASE) IN CASH                                  (540,000)   (1,362,600)

CASH AND CASH EQUIVALENTS, beginning of period           737,300     1,975,600
                                                    ------------  ------------

CASH AND CASH EQUIVALENTS, end of period            $    197,300  $    613,000
                                                    ============  ============


SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION

   Net cash paid during the period for interest     $     47,400  $     38,800
                                                    ============  ============

   Non-Cash Activities:

      Value of stocks and warrants issued for
         services and prepayments                   $    135,100  $    336,800
                                                    ============  ============
      Valuation adjustment                          $    (64,700) $          -
                                                    ============  ============
      Value of warrants issued for credit line
         extension                                  $          -  $     23,300
                                                    ============  ============
      Series B preferred stock dividend, paid in
         kind                                       $     52,000  $     47,200
                                                    ============  ============
      Series A preferred stock dividend, paid in
        kind                                        $    512,500  $    456,600
                                                    ============  ============
</TABLE>

        See accompanying notes to the consolidated financial statements

                                       8
<PAGE>

                            ALANCO TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE PERIOD ENDED MARCH 31, 2006

Note A - Basis of Presentation and Recent Accounting Pronouncements

         Alanco Technologies,  Inc., an Arizona corporation ("Alanco" or
"Company"),  operates in two business segments:  Computer Data Storage Segment
 and RFID Technology Segment.

         The unaudited condensed consolidated balance sheet as of March 31,
2006, the related unaudited condensed consolidated statements of operations,
changes in shareholders' equity and cash flows for the nine months ended March
31, 2006 presented herein have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and in accordance with the instructions to Form 10-QSB.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In our opinion, the accompanying
condensed consolidated financial statements include all adjustments necessary
for a fair presentation of such condensed consolidated financial statements.
Such necessary adjustments consist of normal recurring items and the elimination
of all significant intercompany balances and transactions.

         These interim condensed consolidated financial statements should be
read in conjunction with the Company's June 30, 2005, Amended Annual Report on
Form 10-KSB. Interim results are not necessarily indicative of results for a
full year. Certain reclassifications have been made to conform prior period
financials to the presentation in the current reporting period. The
reclassifications had no effect on net loss.

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.

         All stock options issued to employees have an exercise price not less
than the fair market value of the Company's Common Stock on the date of grant.
In accordance with accounting for such options utilizing the intrinsic value
method under APB 25, there is no related compensation expense recorded in the
Company's financial statements for the nine months ended March 31, 2006 and
2005. Had compensation cost for stock-based compensation been determined based
on the fair value of the options at the grant dates consistent with the method
of SFAS 123, the Company's net loss and loss per share would have been increased
to the pro forma amounts presented below.

                                       9
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

<TABLE>
<S>                                                <C>            <C>
                                                    Nine months ended March 31,
                                                        2006          2005
                                                    ------------  ------------
Net loss, as reported                               $ (3,662,800) $ (3,387,200)

Deduct: Total stock-based employee compensation
     expense determined under fair value based
     methods for all awards, net of related tax
     effects                                        $   (525,000) $   (178,100)
                                                    ------------  ------------

Pro forma net loss                                  $ (4,187,800) $ (3,565,300)
                                                    ============  ============

Net loss per common share, basic and diluted
     As reported                                    $      (0.13) $      (0.13)
                                                    ============  ============
     Pro forma                                      $      (0.15) $      (0.14)
                                                    ============  ============

Weighted Average Shares Outstanding,
     Basic and Diluted                                28,351,700    25,118,000
                                                    ============  ============
</TABLE>

During the nine months ended March 31, 2006, the Company granted employee stock
options to purchase 2,125,000 shares of the Company's Class A Common Stock at an
average purchase price of $0.77, market price on date of grant. The fair value
of option grants is estimated as of the date of grant, in accordance with SFAS
123, utilizing the Black-Scholes option-pricing model, with the assumptions
substantively utilized in the year-end financial statements.

Long-lived assets and intangible assets - The Company reviews carrying values at
least annually or whenever events or circumstances indicate the carrying values
may not be recoverable through projected discounted cash flows.

Recent Accounting Pronouncements - In November 2004, the FASB issued Statement
No. 151 ("SFAS 151"), "Inventory Cost - An Amendment of ARB No. 43, Chapter 4."
SFAS 151 clarifies accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material. It requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of abnormal. Currently, we do not have any inventory items that fall
into the classifications discussed; accordingly, adoption of SFAS 151 does not
have a significant impact on our financial statements.

In December 2004, the FASB issued Statement No. 153 ("SFAS 153"), "Exchanges of
Nonmonetary Assets - An Amendment of APB Opinion No. 29." SFAS 153 amends APB
Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. Adoption of SFAS 153 does not
have a significant impact on our financial statements.

In December 2004, the FASB issued Statement No. 123R ("SFAS 123R"), "Share-Based
Payment." This Statement focuses primarily on accounting for transactions in
which an entity obtains employee services in share-based payment transactions.


                                       10
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

It requires that the fair-value-based method be used to account for these
transactions for all public entities.

This Statement is effective for small business issuers for the first fiscal year
beginning after December 15, 2005 and will effect any stock-based compensation
for options issued after that date, or not vested as of that date. In May 2005,
the FASB issued Statement No. 154 ("SFAS 154"), "Accounting Changes and Error
Corrections." SFAS 154 replaces APB Opinion No. 20, ("APB 20") and SFAS No. 3 to
require retrospective application of changes to all prior period financial
statements so that those financial statements are presented as if the current
accounting principle had always been applied. APB 20 previously required most
voluntary changes in accounting principles to be recognized by including in net
income of the period of change the cumulative effect of changing to the new
accounting principle. In addition, SFAS 154 carries forward without change the
guidance contained in APB 20 for reporting a correction of an error in
previously issued financial statements and a change in accounting estimate. SFAS
154 is effective for changes and corrections made after January 1, 2006, with
early adoption permitted. The Company is currently not contemplating changes
that would be impacted by SFAS 154.

Note B - Inventories

         Inventories are recorded at the lower of cost or market. The
composition of inventories as of March 31, 2006 and June 30, 2005 are summarized
as follows:
<TABLE>
<S>                                                <C>            <C>
                                                      March 31,     June 30,
                                                        2006          2005
                                                    ------------  ------------
                                                      (unaudited)
Raw materials and purchased parts                   $  2,378,100  $  2,011,900
Work-in-progress                                         112,600       106,000
Finished goods                                           117,600        99,300
                                                    ------------  ------------
                                                       2,608,300     2,217,200
Less reserves for obsolescence                          (355,400)     (314,600)
                                                    ------------  ------------
                                                    $  2,252,900  $  1,902,600
                                                    ============  ============
</TABLE>

Note C - Contracts In Process

         Costs incurred, estimated earnings and billings in the RFID Technology
segment, related to contracts for the installation of TSI PRISM system in
process at March 31, 2006 and June 30, 2005 consist of the following:

<TABLE>
<S>                                                <C>            <C>
                                                      March 31,     June 30,
                                                        2006          2005
                                                    ------------  ------------
                                                     (unaudited)
Costs incurred on uncompleted contracts             $     71,000  $     34,100
Estimated gross profit earned to date                     13,600         1,700
                                                    ------------  ------------
Revenue earned to date                                    84,600        35,800
Less Billing to date                                    (116,500)      (40,000)
                                                    ------------  ------------
Billing in excess of costs and
     estimated earnings                             $    (31,900) $     (4,200)
                                                    ============  ============
</TABLE>

                                       11
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

Note D - Deferred Revenue

         Deferred Revenues at March 31, 2006 and June 30, 2005 consist of the
following:
<TABLE>
<S>                                                <C>            <C>
                                                      March 31,     June 30,
                                                        2006          2005
                                                    ------------  ------------
                                                    (unaudited)
Extended warranty revenue                           $     47,400  $     60,100
Less - current portion                                   (47,400)      (60,100)
                                                    ------------  ------------
Deferred revenue - long term                        $          -  $          -
                                                    ============  ============
</TABLE>

Note E - Loss Per Share

         Basic loss per share of common stock was computed by dividing net loss
by the weighted average number of shares of common stock outstanding.

         Diluted earnings per share are computed based on the weighted average
number of shares of common stock and dilutive securities outstanding during the
period. Dilutive securities are options and warrants that are freely exercisable
into common stock at less than the prevailing market price. Certain potentially
dilutive securities are not included in the weighted average number of shares
when inclusion would increase the earnings per share or decrease the loss per
share. As of March 31, 2006, when the closing market price of the Company's
Class A Common Stock on the NASDAQ Capital Market was $0.65, there were
1,200,000 potentially dilutive in-the-money warrants outstanding and 2,362,500
potentially dilutive in-the-money options outstanding. In addition, as of March
31, 2006, there are 4,307,500 out-of-the-money warrants outstanding and
6,797,500 out-of-the-money options outstanding. There were also 3,122,900 shares
of Series A Convertible Preferred Stock outstanding (convertible into 9,368,700
shares of Class A Common Stock) and 73,200 shares of Series B Convertible
Preferred Stock outstanding (convertible into 951,600 shares of Class A Common
Stock).

Note F - Equity

         During the nine months ended March 31, 2006, the Company issued a total
of 3,715,000 shares of the Company's Class A Common Stock. Included were
1,990,000 shares issued upon exercise of outstanding warrants and options
generating $1,188,600 in proceeds to the Company and 225,000 shares, valued at
fair market value on date of issue of $135,100, issued in exchange for future
services to be rendered to the Company. In addition, the Company completed the
sale on January 17, 2006, of a private offering to an institutional investor, of
1,500,000 units consisting of one share of its Class A Common Stock together
with a 3-year warrant to purchase one-half share of the Company's Common Stock
at a price of $.85 per share ("Unit") for a unit sale price of $.60. The Company
received $830,000, net of commission, from the offering. The Company granted
additional warrants to purchase 52,500 shares of its Common Stock on terms
identical to those granted in the private offering as additional commission
related to the offering.

         During March 2005, the Company entered into a technology license
agreement with a developer of RFID real-time location services technology
utilizing 2.4 GHz wireless networking standards. In conjunction with the
execution of the license agreement, the Company issued 250,000 shares of the
Company's Class A Common Stock, the value of which may be applied to future
royalty payments and inventory purchases ("Prepayment"). Another 150,000 shares
were issued under the same terms on December 30, 2005 as consideration to amend
the agreement. The value for the 400,000 shares issued is to be determined at
market value on the effective date of the applicable stock registration
statement; however, due to a delay in the effective date, the Company agreed to
fix the value at $.60 per share, before commissions. At March 31, 2006, the
shares were valued at $240,000, or $.60 per share, $.05 lower than the closing
stock price at March 31, 2006 of $.65 per share. The shares will remain valued
at the lower of $.60 per share or the closing price of the Company's common


                                       12
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

stock. If the Prepayment value of the 400,000 shares is determined to be less
than the $240,000 value ($.60 per share) on the effective date, the Company has
an obligation to make additional prepayments so that the total prepayment under
the transaction is $240,000, therefore the Company would record an appropriate
liability to make up the deficiency. At June 30, 2005, the 250,000 shares
previously issued had been valued at $220,700.

         On January 19, 2006, the Company filed an S-3 registration statement,
which included the 400,000 shares discussed above. That S-3 filing is currently
under review by the SEC. The Company is working with the SEC and anticipates an
effective date shortly.

         In October 2005, the Company reduced the exercise price for warrants
(due to expire on December 31, 2005) from $1.00 per share to $.70 per share to
purchase 1,450,000 shares of the Company's Class A Common Stock, granted to a
group of equity investors in conjunction with a private placement in October
2002. The price was further reduced to $.50 on November 16, 2005 and for every
$.50 warrant exercised, a new 3 year warrant was issued at an exercise price of
$.50. (In all instances, the adjusted exercise price of the warrants outstanding
and the exercise price of the warrants granted represented a value equal to or
greater than market on date modified or granted.) Warrants to purchase 600,000
(41.3%) of the 1,450,000 shares were held by officers and directors of the
Company, including warrants to purchase 100,000 shares held by Robert R.
Kauffman, CEO, Director and greater than five percent (5%) owner of the Company,
and warrants to purchase 400,000 shares controlled by Don Anderson, a Director
and greater than five percent (5%) owner of the Company. 1,150,000, or 79.3%, of
the 1,450,000 warrants modified were exercised by December 31, 2005 (included in
the total warrants and options exercised above), resulting in proceeds of
$575,000 to the Company.

         The Company declared and paid dividends-in-kind during the nine months
ended March 31, 2006 on the Company's preferred shares through the issuance of
341,700 shares of Series A Preferred Stock valued at $512,500 and 5,200 shares
of Series B Preferred Stock valued at $52,000. The Preferred Stocks are more
fully discussed in the Form-10KSB for the year ended June 30, 2005.

Note G -Industry Segment Data

Information concerning operations by industry segment follows (unaudited):

                                       13
<PAGE>
                            ALANCO TECHNOLOGIES, INC.
<TABLE>
<CAPTION>
                                                      Nine Months ended 03/31     Three Months ended 03/31
                                                        2006          2005          2006         2005
<S>                                                <C>            <C>            <C>           <C>
                                                    ---------------------------  --------------------------
Revenue
   Data Storage                                     $  4,371,400  $  4,638,200   $  1,380,900  $  1,450,700
   RFID Technology                                       321,300       715,700         85,300        80,500
                                                    ------------  ------------   ------------  ------------
   Total Revenue                                       4,692,700     5,353,900      1,466,200     1,531,200
                                                    ============  ============   ============  ============

Gross Profit
   Data Storage                                        1,522,800     1,579,400        531,200       532,400
   RFID Technology                                        84,800       281,000         20,300        23,500
                                                    ------------  ------------   ------------  ------------
   Total Gross Profit                                  1,607,600     1,860,400        551,500       555,900
                                                    ------------  ------------   ------------  ------------

Gross Margin
   Data Storage                                             34.8%         34.1%          38.5%         36.7%
                                                    ------------  ------------   ------------  ------------
   RFID Technology                                          26.4%         39.3%          23.8%         29.2%
                                                    ------------  ------------   ------------  ------------
   Overall Gross Margin                                     34.3%         34.7%          37.6%         36.3%
                                                    ------------  ------------   ------------  ------------

Selling, General and Administrative Expense
   Data Storage                                        1,530,400     1,351,700        445,300       473,100
   RFID Technology                                     2,062,300     2,069,200        692,900       675,300
                                                    ------------  ------------   ------------  ------------
   Total Segment Operating Expense                     3,592,700     3,420,900      1,138,200     1,148,400
                                                    ------------  ------------   ------------  ------------

Operating Profit (Loss)
   Data Storage                                           (7,600)      227,700         85,900        59,300
   RFID Technology                                    (1,977,500)   (1,788,200)      (672,600)     (651,800)
   Corporate Expense, net                             (1,124,100)   (1,358,900)      (441,900)     (563,800)
                                                    ------------  ------------   ------------  ------------
   Operating Loss                                   $ (3,109,200) $ (2,919,400)  $ (1,028,600)   (1,156,300)
                                                    ============  ============   ============  ============

Depreciation and Amortization
   Data Storage                                           18,200        14,500          5,900         6,500
   RFID Technology                                       280,500       240,500         75,100        81,800
   Corporate                                               2,500         2,300            700           900
                                                    ------------  ------------   ------------  ------------
   Total Depreciation and Amortization              $    301,200  $    257,300   $     81,700  $     89,200
                                                    ============  ============   ============  ============
</TABLE>

                                       14
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

Note H - Related Party Transactions

         The Company has a $1.5 million line of credit agreement ("Agreement"),
more fully discussed in the Company's Form 10-KSB for the year ended June 30,
2005, with a private trust controlled by Mr. Donald Anderson, a greater than
five percent stockholder and a member of the Company's Board of Directors. See
Note - F Equity for discussion of modification to warrants granted to a group of
equity investors, including entities controlled by Mr. Anderson, and including
Mr. Robert Kauffman, the Company's CEO and member of the Company's Board of
Directors who is also a greater than 5% owner of the Company. Also see Note K -
Subsequent Events for discussion of a sale of equity securities to Mr. Anderson
subsequent to March 31, 2006.

Note I - Line of Credit

         At March 31, 2006, the Company had an outstanding balance under the
line of credit agreement of $1,089,000. The balance is under a $1.5 million line
of credit agreement with a private trust ("Lender"), entered into in June 2002
and last modified on June 29, 2005. Under the Agreement, the Company must
maintain a minimum balance due under the line of at least $1,000,000 through the
July 1, 2007 expiration date. As such, the $1,000,000 due under the line of
credit agreement is recorded as Notes payable, long term. At March 31, 2006, the
Company had $411,000 available under the line of credit agreement.

Note J - Litigation

         The Company continues to be a defendant in litigation that relates to
the acquisition, in May of 2002, of substantially all the assets of Technology
Systems International, Inc., a Nevada corporation. No significant new activity
has occurred subsequent to our report of litigation in our Form 10-KSB filed for
the year ended June 30, 2005. Due to internal governance issues affecting the
plaintiff, the litigation has been indefinitely stayed. The Company's
management, in consultation with legal counsel, believes the plaintiff's claims
are without merit and the Company will aggressively defend against the action.

         Litigation previously reported as arising from an expired property
lease between the Company's subsidiary, Arraid, Inc., and Arraid Property
L.L.C., a Limited Liability Company, is continuing. The Company's management, in
consultation with legal counsel, believes the plaintiff's claims are without
merit and the Company is aggressively defending against this action.

Note K - Subsequent Events

         The Company completed on April 26, 2006 the sale, in a private offering
to a trust beneficially owned by a Director of the Company, of 820,000 units
consisting of one share of its Class A Common Stock together with a warrant to
purchase one share of the Company's Common Stock at a strike price of $.65 per
share ("Unit"). The Company received $500,200 from the offering.

Note L - Nasdaq notification

         On February 1, 2006 the Company received notification from Nasdaq
granting the Company an extension until July 31, 2006, to comply with Nasdaq's
$1.00 per share minimum bid price continued listing requirement.

Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Except for historical information, the statements contained herein are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by those
statements. These risks and uncertainties include, but are not limited to, the


                                       15
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

following factors: general economic and market conditions; reduced demand for
information technology equipment; competitive pricing and difficulty managing
product costs; development of new technologies which make the Company's products
obsolete; rapid industry changes; failure by the Company's suppliers to meet
quality or delivery requirements; the inability to attract, hire and retain key
personnel; failure of an acquired business to further the Company's strategies;
the difficulty of integrating an acquired business; undetected problems in the
Company's products; the failure of the Company's intellectual property to be
adequately protected; unforeseen litigation; the ability to maintain sufficient
liquidity in order to support operations; the ability to maintain satisfactory
relationships with lenders and to remain in compliance with financial loan
covenants and other requirements under current banking agreements; and the
ability to maintain satisfactory relationships with suppliers and customers.

General

         Information on industry segments is incorporated by reference from Note
G - Industry Segment Data to the Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

         Management's discussion and analysis of financial condition and results
of operations are based upon the condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of our financial
statements requires the use of estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent liabilities. On an ongoing basis, estimates are revalued, including
those related to areas that require a significant level of judgment or are
otherwise subject to an inherent degree of uncertainty. These areas include
allowances for doubtful accounts, inventory valuations, carrying value of
goodwill and intangible assets, estimated profit on uncompleted contracts in
process, income and expense recognition, income taxes, ongoing litigation, and
commitments and contingencies. Our estimates are based upon historical
experience, observance of trends in particular areas, information and/or
valuations available from outside sources and on various other assumptions that
we believe to be reasonable under the circumstances and which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual amounts may differ from these
estimates under different assumptions and conditions.

         Accounting policies are considered critical when they are significant
and involve difficult, subjective or complex judgments or estimates. We
considered the following to be critical accounting policies:

         Principles of consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.

         Revenue recognition - The Company recognizes revenue from the Data
Storage Segment, net of anticipated returns, at the time products are shipped to
customers, or at the time services are provided. Revenue from material long-term
contracts (in excess of $250,000 and over a 90-day completion period) in both
the Data Storage Segment and the RFID Technology Segment are recognized on the
percentage-of-completion method for individual contracts, commencing when
significant costs are incurred and adequate estimates are verified for
substantial portions of the contract to where experience is sufficient to
estimate final results with reasonable accuracy. Revenues are recognized in the
ratio that costs incurred bear to total estimated costs. Changes in job
performance, estimated profitability and final contract settlements would result
in revisions to cost and income, and are recognized in the period in which the
revisions were determined. Contract costs include all direct materials,
subcontracts, labor costs and those direct and indirect costs related to
contract performance. General and administrative costs are charged to expense as
incurred. At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss is accrued.

         Long-lived assets and intangible assets - The Company reviews carrying
values at least annually or whenever events or circumstances indicate the
carrying values may not be recoverable through projected discounted cash flows.

                                       16
<PAGE>
                            ALANCO TECHNOLOGIES, INC.
Results of Operations

(A)      Three months ended 03/31/06 versus 03/31/05
Sales
         Consolidated sales for the quarter ended March 31, 2006 were
$1,466,200, a decrease of $ 65,000, or 4.2%, when compared to $1,531,200 for the
comparable quarter of the prior year. The decrease resulted from a sales
decrease in the Data Storage segment of $69,800, or 4.8%, from $1,450,700 for
the quarter ended March 31, 2005 to $1,380,900 for the current quarter. The 4.8%
decrease in Data Storage segment sales resulted primarily from delayed shipments
related to international sales.

 Gross Profit and Operating Expenses
         Gross profit reported during the quarter amounted to $551,500, a
decrease of $4,400, or .8%, when compared to $555,900 reported for the same
quarter of the prior year. Consolidated gross margins increased from 36.3% for
the quarter ended March 31, 2005 to 37.6% for the current quarter. The increase
in gross margin resulted from improved gross margin of the Data Storage segment,
which increased to 38.5% from 36.7% for the same quarter of the prior year.

         Operating Expenses for the current quarter decreased to $1,580,100, a
decrease of $132,100, or 7.7%, when compared to $1,712,200 incurred in the
comparable quarter of fiscal year 2005. Sales, general and administrative
expenses related to Data Storage decreased to $445,300, a decrease of $27,800,
or 5.9%, when compared to sales, general and administrative expense for the same
quarter of the prior year. The decrease for the Data Storage segment resulted
primarily from a decrease in commission expenses. RFID Technology Segment
selling, general and administrative expenses increased from $675,300 for the
quarter ended March 31, 2005 to $692,900 in the current quarter, an increase of
2.6%. Corporate expense decreased to $441,900, a decrease of $121,900, or 21.6%,
from the $563,800 reported in the quarter ended March 31, 2005, due to
reductions in legal expenses.

Operating Loss
         The Operating Loss for the quarter was ($1,028,600) compared to a loss
of ($1,156,300) for the same quarter of the prior year, a decrease of $127,700,
or 11%. The decrease in Operating Loss resulted from the Data Storage segment
reporting an Operating Profit of $85,900, compared to an Operating profit of
$59,300 reported in the comparable quarter of the prior year and a decrease in
corporate expenses. The RFID Technology segment increased its Operating Loss by
($20,800) to ($672,600), an increase of 3.2%, when compared to the Operating
Loss reported in the same quarter of the prior year of ($651,800). The Data
Storage segment's increase in operating profit was due primarily to the increase
in gross margin and decreases in operating expenses.

Interest Expense, Other Income and Dividends Expense
         Net interest expense for the quarter amounted to $23,700 compared to
interest expense of $11,200 for the same quarter in the prior year. The interest
expense increase resulted from increases in the prime rate, and an increase in
the minimum borrowing limit of our credit line. Other Income decreased slightly
to $60,200 from $63,900 reported for the comparable quarter of the prior year.
The Company paid quarterly in-kind Series B Preferred Stock dividends with
values of $281,500 and $252,000 in the quarters ended March 31, 2006 and 2005,
respectively.

Net Loss Attributable to Common Stockholders
         Net Loss Attributable to Common Stockholders for the quarter ended
March 31, 2006 amounted to ($1,273,600), or ($.04) per share, compared to a loss
of ($1,355,600), or ($.05) per share, in the comparable quarter of the prior
year. Although the Company has reported a significant Net Loss Attributable to
Common Stockholders for both the current quarter and the same quarter of the
prior year, it anticipates continued improving future operating results.
However, actual results in both the Data Storage segment and the RFID Technology
segments may be affected by unfavorable economic conditions and reduced capital
spending budgets. If the economic conditions in the United States worsen or if a
wider or global economic slowdown occurs, Alanco may experience a material
adverse impact on its operating results and business conditions.

                                       17
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

(B)      Nine months ended 03/31/2006 versus 03/31/2005

Sales
         Consolidated Sales for the nine months ended March 31, 2006 were
$4,692,700, a decrease of $661,200, or 12.3%, compared to $5,353,900 reported
for the comparable period of the previous year. The sales decrease is attributed
to decreases in both of the Company's two business segments. The Company's Data
Storage segment reported sales of $4,371,400, a decrease of $266,800, or 5.8%,
for the nine months ended March 31, 2006, compared to $4,638,200 reported for
the nine months ended March 31, 2005. The RFID Technology segment reported sales
of $321,300, a 55.1% decrease when compared to $715,700 reported for the
comparable period in the prior fiscal year.

Gross Profit and Operating Expenses
         Gross profit generated during the nine month period ended March 31,
2006 amounted to $1,607,600, a decrease of $252,800, or 13.6%, when compared to
$1,860,400 reported for the same period of the prior year. Gross margins
decreased slightly from 34.7% for the nine months ended March 31, 2005 to 34.3%
for the current period. The decrease in gross margin resulted from a reduced
gross margin in the RFID Technology segment due to low sales volumes. The gross
margin in the Data Storage segment increased from 34.1% to 34.8% when comparing
the current quarter to the comparable quarter of the previous year.

         Operating expenses for the nine months ended March 31, 2006 decreased
to $4,716,800, a 1.3% or $63,000 decrease, when compared to $4,779,800 incurred
in the comparable period of fiscal year 2005. The decrease was due primarily to
a decrease in corporate legal expense.

Operating Loss
         The Operating Loss for the nine-month period was ($3,109,200) compared
to a loss of ($2,919,400) for the same nine-month period of the prior fiscal
year, an increase of $189,800 or 6.5%. The increased Operating Loss resulted
from the RFID Technology segment increasing its loss by $189,300, or 10.6%, to
($1,977,500), compared to a loss of ($1,788,200) in the prior year, and the Data
Storage Segment reporting a loss of ($7,600) compared to a $227,700 operating
profit in the prior year. Corporate expense decreased by $234,800.

Interest Expense, Other Income and Dividends Expense
         Net interest expense for the nine months ended March 31, 2006 amounted
to $65,900 compared to net interest expense of $38,800 for the same nine-month
period in the prior year. The increase resulted from increases in the prime
rate, and an increase in the minimum borrowing limit of our credit line. Other
income increased slightly from $74,700 for the nine month period ended march 31,
2005 to $76,900 for the current period. The Company paid in-kind Series A and
Series B Preferred Stock dividends with values of $564,600 and $503,700 in the
nine months ended March 31, 2006 and 2005, respectively.

Net Loss Attributable to Common Stockholders
         Net Loss Attributable to Common Stockholders for the nine months ended
March 31, 2006 amounted to ($3,662,800), or ($.13) per share, compared to a loss
of ($3,387,200), or ($.13) per share, in the comparable period of the prior
year. Although the Company has reported increased operating losses in both the
RFID Technology segment and its Data Storage segment, it anticipates improved
future operating results in both segments as markets improve. However, actual
results in both the Data Storage segment and the RFID Technology segments may be
affected by unfavorable economic conditions and reduced capital spending
budgets. If the economic conditions in the United States worsen or if a wider or
global economic slowdown occurs, Alanco may experience a material adverse impact
on its operating results and business conditions.

Liquidity and Capital Resources

         The Company's current assets at March 31, 2006 exceeded current
liabilities by $2,287,900, resulting in a current ratio of 2.4 to 1. At June 30,
2005 the Company's current assets exceeded current liabilities by $2,845,600,
reflecting a current ratio of 3.12 to 1. The decrease in the current ratio at
March 31, 2006 when compared to June 30, 2005 resulted primarily from funding


                                       18
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

operating losses during the period. Accounts receivable of $925,400 at March 31,
2006, reflects a decrease of $166,000, or 15.2%, when compared to the $1,091,400
reported as consolidated accounts receivable at June 30, 2005. The accounts
receivable balance at March 31, 2006 represented fifty four days' sales in
receivables compared to the same fifty four days' sales at June 30, 2005. The
Data Storage segment reported 38 days' sales in receivables while the RFID
Technology segment reported 259 days sales in receivables. The high RFID
Technology segment days sales were due to a contract holdback and slow payments.
Payment of all material balances in the RFID accounts receivable had either been
received by filing date of this Form 10-QSB or payment is anticipated to be
received in the next 30 days.

         Consolidated inventories at March 31, 2006 amounted to $2,252,900, an
increase of $350,300, or 18.4%, when compared to $1,902,600 at June 30, 2005.
March 31, 2006 balances reflect an inventory turnover of 1.8 compared to an
inventory turnover of 2.5 reported at June 30, 2005. The continued high
inventory levels reflect management's continued anticipated revenue increases
for the RFID Technology segment and continuing current sales levels for the Data
Storage Segment.

         At March 31, 2006, the Company had an outstanding balance of $1,089,000
under a $1.5 million formula-based revolving bank line of credit agreement with
interest calculated at prime plus 2%. The line of credit formula is based upon
current asset values and is used to finance working capital. At March 31, 2006,
the Company had $411,000 available under the line of credit. See Line of Credit
Footnote I for additional discussion of the existing line of credit agreement.

         Cash used in operations for the nine-month period ended March 31, 2006
was $2,842,000 an increase of $152,700 when compared to cash used in operations
of $2,689,300 for the comparable period ended March 31, 2005. The increase
resulted primarily from increases in operating losses and inventory levels
during the current period.

         During the nine months ended March 31, 2006, the Company reported cash
flows from investing activities of $53,000, compared to $31,900 reported for the
nine months ended March 31, 2005. The increase is primarily the result of
reduced purchases of property, plant and equipment and a reduction in assets
held for sale.

         Cash provided by financing activities for the nine months ended March
31, 2006 amounted to $2,249,000, an increase of $954,200, or 73.7%, compared to
the $1,294,800 provided by financing activities for the nine months ended March
31, 2005. The increase resulted from increases in net proceeds by financing
activities of $689,500 and increases in net borrowing when compared to the prior
year.

         Cash and cash equivalents at March 31, 2006 amounted to $197,300. In
addition, the Company had $411,000 available under its line of credit agreement
(see Note I - Line of Credit) and subsequent to March 31, 2006, the Company
completed the sale of 820,000 units consisting of one share of its Class A
Common Stock together with a warrant to purchase one share of the Company's
Common Stock at a price of $.85 per share ("Unit"). The Company received
$500,200 from the offering (See Note K - Subsequent Events).

         The Company believes that additional cash resources will be required
for working capital to achieve planned operating results for fiscal year 2006
and, if working capital requirements exceed current availability, the Company
anticipates raising capital through additional borrowing, the exercise of stock
options and warrants and/or the sale of stock in a private placement. The
additional capital would supplement the projected cash flows from operations and
the line of credit agreement in place at March 31, 2006. If additional working
capital is required and the Company is unable to raise the required additional
capital, it may materially affect the ability of the Company to achieve its
financial plan. The Company has raised a significant amount of capital in the
past and believes it has the ability, if needed, to raise the additional capital
to fund the planned operating results for fiscal year 2006. See Footnote F -
Equity for additional information related to working capital raised by the
Company during the nine months ended March 31, 2006, necessary to achieve
planned operating results for the current fiscal year results.

                                       19
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

Item 3 - CONTROLS AND PROCEDURES

         The Company maintains disclosure controls and procedures designed to
ensure that it is able to collect the information it is required to disclose in
the reports it files with the Securities and Exchange Commission (SEC), and to
process, summarize and disclose this information within the time periods
specified in the rules of the SEC. Based on various evaluations of the Company's
disclosure controls and procedures, as of the end of the period covered by this
Form 10-QSB, the Chief Executive and Chief Financial Officers believe that these
controls and procedures are effective to ensure that the Company is able to
collect, process and disclose the information it is required to disclose in the
reports it files with the SEC within the required periods.

         The Company also maintains a system of internal controls designed to
provide reasonable assurance that: transactions are executed in accordance with
management's general or specific authorization; transactions are recorded as
necessary (1) to permit preparation of financial statements in conformity with
generally accepted accounting principles, and (2) to maintain accountability for
assets. Access to assets is permitted only in accordance with management's
general or specific authorization; and the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

         During the fiscal quarter covered by this report we made no change in
our internal control over financial reporting (as such term is defined in Rules
13a-15(f) under the Exchange Act) which materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

         The Company continues to be a defendant in litigation that relates to
the acquisition, in May of 2002, of substantially all the assets of Technology
Systems International, Inc., a Nevada corporation. No significant new activity
has occurred subsequent to our report of litigation in our Form 10-KSB filed for
the year ended June 30, 2005. Due to internal governance issues affecting the
plaintiff, the litigation has been indefinitely stayed. The Company's
management, in consultation with legal counsel, believes the plaintiff's claims
are without merit and the Company will aggressively defend against the action.
Litigation previously reported as arising from an expired property lease between
the Company's subsidiary, Arraid, Inc., and Arraid Property L.L.C., a Limited
Liability Company, is continuing. The Company's management, in consultation with
legal counsel, believes the plaintiff's claims are without merit and the Company
is aggressively defending against this action. The Company intends to pursue
legal expense reimbursement from both the Company's insurance carrier (where
appropriate) and the Plaintiffs in the litigation matters.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         During the nine months ended March 31, 2006, the Company issued 341,700
shares of Series A Preferred Stock and 3,400 shares of Series B Preferred Stock
as dividend in-kind payments, 1,990,000 shares of Class A Common Stock for the
exercise of existing warrants and options, 1,500,000 shares of Class A Common
Stock in a private offering to an accredited investor, and 225,000 shares of
Common Stock for services rendered.

                                       20
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

Item 6.  EXHIBITS

         31.1 Certification of Chief Executive Officer
         31.2 Certification of Chief Financial Officer
         32.1 Certification of Chief Executive Officer and
              Chief Financial Officer

SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.

                            ALANCO TECHNOLOGIES, INC.
                                 (Registrant)

                                         /s/ John A. Carlson
                                         John A. Carlson
                                         Executive Vice President and
                                         Chief Financial Officer

                                       21
<PAGE>
                            ALANCO TECHNOLOGIES, INC.

EXHIBIT 31.1

                                Certification of
                      Chairman and Chief Executive Officer
                          of Alanco Technologies, Inc.

I, Robert R. Kauffman, certify that:

     1. I have reviewed this quarterly report on Form 10-QSB of Alanco
Technologies, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report.

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the period presented in this report;

     4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

     5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

         (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date:    May 15, 2006

/s/ Robert R. Kauffman
---------------------
Robert R. Kauffman
Chairman and Chief Executive Officer

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                            ALANCO TECHNOLOGIES, INC.

EXHIBIT 31.2

                                Certification of
                   Vice President and Chief Financial Officer
                          of Alanco Technologies, Inc.

I, John A. Carlson, certify that:

     1. I have reviewed this quarterly report on Form 10-QSB of Alanco
Technologies, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report.

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the period presented in this report;

     4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

     5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

         (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: May 15, 2006
/s/ John A. Carlson
---------------------
John A. Carlson
Executive Vice President and Chief Financial Officer

                                       23
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                            ALANCO TECHNOLOGIES, INC.

EXHIBIT 32.1

                                Certification of
               Chief Executive Officer and Chief Financial Officer
                          of Alanco Technologies, Inc.

         This certification is provided pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and accompanies this quarterly report of Form 10-QSB
(the "Report") for the period ended March 31, 2006 of Alanco Technologies, Inc.
(the "Issuer").

         Each of the undersigned, who are the Chief Executive Officer and Chief
Financial Officer, respectively, of Alanco Technologies, Inc., hereby certify
that, to the best of each such officer's knowledge:

         (i) the Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and

         (ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Issuer.

Dated:   May 15, 2006
                                        /s/ Robert R. Kauffman
                                        ----------------------
                                        Robert R. Kauffman
                                        Chief Executive Officer

                                        /s/ John A. Carlson
                                        ----------------------
                                        John A. Carlson
                                        Chief Financial Officer


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